HARMAN Reports Fourth Quarter Fiscal Year 2013 Results
HARMAN Reports Fourth Quarter Fiscal Year 2013 Results
Fourth quarter net sales up 8% to $1.182 billion; non-GAAP operating income of $87 million and EPS of $0.91
Doubles dividend and increases buyback authorization by $200 million
Infotainment and Lifestyle Divisions win industry innovation awards
Completes restructuring of 500 FTEs in high cost countries; ~$35M savings in FY14 and beyond
Additional 430 FTEs reduced with divestment of a German manufacturing operation
STAMFORD, Conn.--(BUSINESS WIRE)-- Harman International Industries, Incorporated, the leading global infotainment and audio group (NYS: HAR) , today announced results for the fourth quarter and full year ended June 30, 2013. Net sales for the fourth quarter were $1.182 billion, an increase of eight percent compared to the same period last year, as all three of the Company's divisions reported sales increases. Net sales increased due to the expansion of recent platform launches in the Infotainment division, growth in home and multimedia products in the Lifestyle Division, and the expansion of the Professional Division's product portfolio into lighting and stronger professional audio sales.
Excluding restructuring and non-recurring charges, fourth quarter non-GAAP operating income was $87 million, compared to $70 million in the same period last year. On the same non-GAAP basis, earnings per diluted share were $0.91 for the quarter compared to $0.67 in the same period last year. The Company recorded restructuring and non-recurring charges of $72 million in the quarter, primarily related to the divestiture of a manufacturing operation in Germany and accrual for potential NAFTA customs duties related to prior years. This was partially offset by the release of contingent consideration related to the acquisition of MWM Acoustics. On a GAAP basis, fourth quarter operating income was $16 million, compared to $71 million in the same period last year, and earnings per diluted share were $0.08 for the quarter compared to $0.69 in the same period last year.
The Company will hold an Investor Day in New York City on Thursday, August 8, 2013 and will provide financial guidance for fiscal 2014, as well as a longer term outlook.
Dinesh C. Paliwal, the Company's Chairman, President and CEO, said, "I am pleased that all three of our divisions reported top line growth in the quarter, which resulted in stronger bottom line performance. We had a phenomenal year for innovation, adding nearly 500 patents and patents pending bringing our intellectual property portfolio to nearly 5,000. At the same time, we continued to take actions to lower the cost base to improve both our short and long term profitability. Positive momentum in all three of our divisions, combined with a more competitive cost structure and world class innovation, positions us well as we begin fiscal 2014."
FY 2013 Key Figures - Total Company | Three Months Ended June 30 | Twelve Months Ended June 30 | |||||||||||||||
Increase | Increase | ||||||||||||||||
$ millions (except per share data) | 3M | 3M | Including | Excluding | 12M | 12M | Including | Excluding | |||||||||
Net sales | 1,182 | 1,091 | 8% | 8% | 4,298 | 4,364 | (2%) | 1% | |||||||||
Gross profit | 285 | 298 | (5%) | (5%) | 1,104 | 1,184 | (7%) | (5%) | |||||||||
Percent of net sales | 24.1% | 27.4% | 25.7% | 27.1% | |||||||||||||
SG&A & Other | 269 | 228 | 18% | 18% | 903 | 884 | 2% | 4% | |||||||||
Operating income | 16 | 71 | (78%) | (79%) | 201 | 300 | (33%) | (31%) | |||||||||
Percent of net sales | 1.3% | 6.5% | 4.7% | 6.9% | |||||||||||||
Net Income | 5 | 49 | (89%) | (89%) | 142 | 330 | (57%) | (56%) | |||||||||
Diluted earnings per share | 0.08 | 0.69 | (89%) | (89%) | 2.04 | 4.57 | (55%) | (55%) | |||||||||
Restructuring-related costs and other non- GAAP items | 72 | (1) | 88 | 9 | |||||||||||||
Non-GAAP | |||||||||||||||||
Gross profit(1) | 316 | 299 | 6% | 5% | 1,140 | 1,188 | (4%) | (2%) | |||||||||
Percent of net sales(1) | 26.7% | 27.4% | 26.5% | 27.2% | |||||||||||||
SG&A & Other(1) | 228 | 229 | (1%) | (1%) | 850 | 878 | (3%) | (1%) | |||||||||
Operating income(1) | 87 | 70 | 25% | 23% | 290 | 310 | (6%) | (4%) | |||||||||
Percent of net sales(1) | 7.4% | 6.4% | 6.7% | 7.1% | |||||||||||||
Net Income(1) | 63 | 48 | 32% | 29% | 214 | 211 | 2% | 4% | |||||||||
Diluted earnings per share(1) | 0.91 | 0.67 | 35% | 33% | 3.07 | 2.93 | 5% | 8% | |||||||||
Shares outstanding - diluted (in millions) | 70 | 72 | 70 | 72 | |||||||||||||
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. | |||||||||||||||||
Summary of Operations - Gross Margin and SG&A
Non-GAAP gross margin for the fourth quarter of fiscal 2013 decreased 70 basis points to 26.7 percent. The decline was primarily due to product mix.
SG&A expense decreased as a percentage of net sales on a non-GAAP basis in the fourth quarter of fiscal 2013 by 170 basis points to 19.3 percent. This change was primarily related to improved operating leverage on higher sales.
Investor Call Today, August 6, 2013
At 11:00 a.m. EDT today, HARMAN's management will host an analyst and investor conference call to discuss the fourth quarter and full year results. Those who want to participate via audio in the earnings conference call should dial 1 (800) 748 2715 (U.S.) or +1 (212) 231 2919 (International) ten minutes before the call and reference HARMAN, Access Code: 21662277.
In addition, HARMAN invites you to visit the Investors section of its website at: www.harman.com where visitors can sign-up for email alerts and conveniently download copies of historical earnings releases and supporting slide presentations, among other documents. The fiscal 2013 fourth quarter earnings release and supporting materials will be posted on the site at approximately 8:00 a.m. EDT, Tuesday, August 6, 2013.
A replay of the call will also be available following its completion at approximately 1:00 p.m. EDT. The replay will be available through November 6, 2013 at 1:00 p.m. EST. To listen to the replay, dial 1 (800) 633 8284 (U.S.) or +1 (402) 977 9140 (International), Access Code: 21662277. If you need technical assistance, call the toll-free Global Crossing Customer Care Line at 1 (800) 473 0602 (U.S.) or +1 (303) 446 4604 (International).
General Information
HARMAN designs, manufactures, and markets a wide range of infotainment and audio solutions for the automotive, consumer, and professional markets. It is a recognized world leader across its customer segments with premium brands including AKG®, Harman Kardon®, Infinity®, JBL®, Lexicon®, and Mark Levinson® and leading-edge connectivity, safety and audio technologies. The company is admired by audiophiles across multiple generations and supports leading professional entertainers and the venues where they perform. More than 25 million automobiles on the road today are equipped with HARMAN audio and infotainment systems. HARMAN has a workforce of 14,000 people across the Americas, Europe, and Asia and reported sales of $4.3 billion for the fiscal year ended June 30, 2013. The company's shares are traded on the New York Stock Exchange under the symbol NYSE:HAR. Please visit www.harman.com for more information.
A reconciliation of the non-GAAP measures included in this press release to the most comparable GAAP measures is provided in the tables contained at the end of this press release. HARMAN does not intend for this information to be considered in isolation or as a substitute for other measures prepared in accordance with GAAP.
Forward-Looking Information
Except for historical information contained herein, the matters discussed in this earnings release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. One should not place undue reliance on these statements. The Company bases these statements on particular assumptions that it has made in light of its industry experience, as well as its perception of historical trends, current market conditions, current economic data, expected future developments and other factors that the Company believes are appropriate under the circumstances. These statements involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including but not limited to: (1) the Company's ability to maintain profitability in its infotainment division if there are delays in its product launches which may give rise to significant penalties and increased engineering expense; (2) the loss of one or more significant customers, or the loss of a significant platform with an automotive customer; (3) fluctuations in currency exchange rates, particularly with respect to the value of the U.S. Dollar and the Euro; (4) the Company's ability to successfully implement its global footprint initiative, including achieving cost reductions and other benefits in connection with the restructuring of its manufacturing, engineering, procurement and administrative organizations; (5) fluctuations in the price and supply of raw materials including, without limitation, petroleum, copper, steel, aluminum, synthetic resins, rare metals and rare-earth minerals, or shortages of materials, parts and components; (6) the inability of the Company's suppliers to deliver products at the scheduled rate and disruptions arising in connection therewith; (7) the Company's ability to maintain a competitive technological advantage through innovation and leading product designs; (8) the Company's failure to maintain the value of its brands and implementing a sufficient brand protection program; and (9) other risks detailed in Harman International Industries, Incorporated Annual Report on Form 10-K for the fiscal year ended June 30, 2012 and other filings made by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise any forward-looking statement except as required by law.
This earnings release also makes reference to the Company's awarded business, which represents the estimated future lifetime net sales for all customers. The Company's future awarded business does not represent firm customer orders. The Company reports its awarded business primarily based on written award letters. The Company calculates its awarded business using various assumptions including global vehicle production forecasts, customer take rates for the Company's products, revisions to product life cycle estimates and the impact of annual price reductions and exchange rates, among other factors. These assumptions are updated on an annual basis. The Company updates the estimates quarterly by adding the value of new awards received and subtracting sales recorded during the quarter. These quarterly updates do not include any assumptions for increased take rates, revisions to product life cycle, or any other factors.
HAR-E
APPENDIX
Infotainment Division
FY 2013 Key Figures - Infotainment | Three Months Ended June 30 | Twelve Months Ended June 30 | |||||||||||||||
Increase | Increase | ||||||||||||||||
$ millions | 3M | 3M | Including | Excluding | 12M | 12M | Including | Excluding | |||||||||
Net sales | 614 | 588 | 4% | 3% | 2,283 | 2,402 | (5%) | (2%) | |||||||||
Gross profit | 131 | 136 | (4%) | (5%) | 482 | 557 | (14%) | (11%) | |||||||||
Percent of net sales | 21.3% | 23.1% | 21.1% | 23.2% | |||||||||||||
SG&A & Other | 136 | 96 | 42% | 41% | 391 | 377 | 4% | 7% | |||||||||
Operating income | (5) | 40 | (113%) | (113%) | 91 | 181 | (50%) | (49%) | |||||||||
Percent of net sales | (0.9%) | 6.8% | 4.0% | 7.5% | |||||||||||||
Restructuring-related costs and other non- GAAP items | 49 | (1) | 60 | 1 | |||||||||||||
Non-GAAP | |||||||||||||||||
Gross profit(1) | 132 | 137 | (3%) | (5%) | 483 | 561 | (14%) | (12%) | |||||||||
Percent of net sales(1) | 21.5% | 23.2% | 21.2% | 23.4% | |||||||||||||
SG&A & Other(1) | 88 | 98 | (10%) | (11%) | 332 | 380 | (12%) | (10%) | |||||||||
Operating income(1) | 44 | 39 | 14% | 9% | 151 | 182 | (17%) | (15%) | |||||||||
Percent of net sales(1) | 7.2% | 6.6% | 6.6% | 7.6% | |||||||||||||
1 A non-GAAP measure, see reconciliations of non-GAAP measures later in this release. | |||||||||||||||||
Net sales in the fourth quarter of fiscal 2013 were $614 million, an increase of four percent compared to the prior year due to increased volumes from the Company's recent platform launches that continue to gain traction and expand across car lines.
Gross margin on a non-GAAP basis in the fourth quarter of fiscal 2013 decreased 170 basis points to 21.5 percent primarily due to lower operating leverage as a result of lower production volumes in Europe and higher warranty costs. SG&A spending decreased 220 basis points to 14.4 percent of net sales primarily due to high profit engineering change orders and recovery of project engineering costs.
Infotainment Division Highlights
HARMAN continues to be the global driving force for innovation in embedded infotainment systems. During the quarter, the Company's best in class approach was acknowledged by Frost & Sullivan, the global research and consulting firm. Frost & Sullivan named HARMAN as a Best Practices Honoree and awarded the Company with its 2013 Award for Global Industry Leadership for In-Vehicle Infotainment.
The Company continues to gain traction with five new Start of Production (SOP) programs launched this year with BMW, Mercedes, Chrysler/Fiat, Volkswagen, and Harley Davidson. Volumes on the recently-launched platforms are increasing and the platforms are expanding across car lines.
During its Investor Day presentations, the Company will provide an analysis of its infotainment backlog and newly awarded business.
In addition to the five new SOPs, highlights during fiscal 2013 for the Infotainment Division included the continued expansion beyond the center console into advanced safety technologies. During the fiscal year, the Company demonstrated a series of advanced safety features such as heads-up displays, augmented navigation, and gesture controls at events such as CES and the Geneva Motor Show; introduced an Android-based infotainment platform; acquired driver safety technology company iOnRoad Technologies Ltd.; and established a software engineering center in Vernon Hills, Illinois. HARMAN also showcased the integration of Apple's Siri intelligent voice concierge in the latest Ferrari FF model. HARMAN's cloud-based Aha Radio solution gained traction during the year, with ten leading automakers from Asia, Europe and North America offering the embedded service in their vehicles by the end of 2013. The Company also announced the creation of HARMAN Infotainment Services that is expected to leverage the installed base of over 20 million HARMAN infotainment equipped vehicles on the road today to create a fast growing, recurring revenue stream with high margins.
Lifestyle Division
